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Friday, May 2, 2014

Spring 2014 Journal of Economic Perspectives

The Spring 2014 issue of the Journal of Economic Perspectives is now freely available on-line, courtesy of the publisher, the American Economic Association. Indeed, not only this issue but all previous issues back to 1987 are available. (Full disclosure: I've been the Managing Editor since the journal started, so this issue is #108 for me.) I'll probably blog about some of these articles in the next week or two. But for now, I'll first list the table of contents, and then below will provide abstracts of articles and weblinks.

Symposium: Big Data"Big Data: New Tricks for Econometrics," by Hal R. Varian"High-Dimensional Methods and Inference on Structural and Treatment Effects," by Alexandre Belloni, Victor Chernozhukov and Christian Hansen"Political Campaigns and Big Data," by David W. Nickerson and Todd Rogers"Privacy and Data-Based Research," by Ori Heffetz and Katrina Ligett

"Raj Chetty: 2013 Clark Medal Recipient," by Martin Feldstein"Fluctuations in Uncertainty," by Nicholas Bloom"The Market for Blood," by Robert Slonim, Carmen Wang and Ellen Garbarino"Retrospectives: The Cyclical Behavior of Labor Productivity and the Emergence of the Labor Hoarding Concept," by Jeff E. Biddle"Recommendations for Further Reading," by Timothy Taylor"Correction and Update: The Economic Effects of Climate Change," by Richard S. J. Tol"Farewell to Notes," by Timothy Taylor

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And here are the abstracts and links:

Symposium: Big Data

"Big Data: New Tricks for Econometrics," by Hal R. Varian

Computers are now involved in many economic transactions and can capture data associated with these transactions, which can then be manipulated and analyzed. Conventional statistical and econometric techniques such as regression often work well, but there are issues unique to big datasets that may require different tools. First, the sheer size of the data involved may require more powerful data manipulation tools. Second, we may have more potential predictors than appropriate for estimation, so we need to do some kind of variable selection. Third, large datasets may allow for more flexible relationships than simple linear models. Machine learning techniques such as decision trees, support vector machines, neural nets, deep learning, and so on may allow for more effective ways to model complex relationships. In this essay, I will describe a few of thes e tools for manipulating and analyzing big data. I believe that these methods have a lot to offer and should be more widely known and used by economists.Full-Text Access | Supplementary Materials

Data with a large number of variables relative to the sample size—"high-dimensional data"—are readily available and increasingly common in empirical economics. High-dimensional data arise through a combination of two phenomena. First, the data may be inherently high dimensional in that many different characteristics per observation are available. For example, the US Census collects information on hundreds of individual characteristics and scanner datasets record transaction-level data for households across a wide range of products. Second, even when the number of available variables is relatively small, researchers rarely know the exact functional form with which the small number of variables enter the model of interest. Researchers are thus faced with a large set of potential variables formed by different ways of interacting and transforming the underlying variables. This paper provides an overview of how innovations in "data mining" can be adapted and modified to provide high-quality inference about model parameters. Note that we use the term "data mining" in a modern sense which denotes a principled search for "true" predictive power that guards against false discovery and overfitting, does not erroneously equate in-sample fit to out-of-sample predictive ability, and accurately accounts for using the same data to examine many different hypotheses or models.Full-Text Access | Supplementary Materials

"Political Campaigns and Big Data," by David W. Nickerson and Todd Rogers

Modern campaigns develop databases of detailed information about citizens to inform electoral strategy and to guide tactical efforts. Despite sensational reports about the value of individual consumer data, the most valuable information campaigns acquire comes from the behaviors and direct responses provided by citizens themselves. Campaign data analysts develop models using this information to produce individual-level predictions about citizens' likelihoods of performing certain political behaviors, of supporting candidates and issues, and of changing their support conditional on being targeted with specific campaign interventions. The use of these predictive scores has increased dramatically since 2004, and their use could yield sizable gains to campaigns that harness them. At the same time, their widespread use effectively creates a coordination game with incomplete information between allied organizations. As such, organizations would benefit from partitioning the electorate to not duplicate efforts, but legal and political constraints preclude that possibility.Full-Text Access | Supplementary Materials

"Privacy and Data-Based Research," by Ori Heffetz and Katrina Ligett

What can we, as users of microdata, formally guarantee to the individuals (or firms) in our dataset, regarding their privacy? We retell a few stories, well-known in data-privacy circles, of failed anonymization attempts in publicly released datasets. We then provide a mostly informal introduction to several ideas from the literature on differential privacy, an active literature in computer science that studies formal approaches to preserving the privacy of individuals in statistical databases. We apply some of its insights to situations routinely faced by applied economists, emphasizing big-data contexts.Full-Text Access | Supplementary Materials

In this paper, we "slice up the global value chain" using a decomposition technique that has recently become feasible due to the development of the World Input-Output Database. We trace the value added by all labor and capital that is directly and indirectly needed for the production of final manufacturing goods. The production systems of these goods are highly prone to international fragmentation as many stages can be undertaken in any country with little variation in quality. We seek to establish a series of facts concerning the global fragmentation of production that can serve as a starting point for future analysis. We describe four major trends. First, international fragmentation, as measured by the foreign value-added content of production, has rapidly increased since the early 1 990s. Second, in most global value chains there is a strong shift towards value being added by capital and high-skilled labor, and away from less-skilled labor. Third, within global value chains, advanced nations increasingly specialize in activities carried out by high-skilled workers. Fourth, emerging economies surprisingly specialize in capital-intensive activities.Full-Text Access | Supplementary Materials

"Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research," by Robert C. Johnson

Due to the rise of global supply chains, gross exports do not accurately measure the amount of value added exchanged between countries. I highlight five facts about differences between gross and value-added exports. These differences are large and growing over time, currently around 25 percent, and manufacturing trade looks more important, relative to services, in gross than value-added terms. These differences are also heterogenous across countries and bilateral partners, and changing unevenly across countries and partners over time. Taking these differences into account enables researchers to obtain better quantitative answers to important macroeconomic and trade questions. I discuss how the facts inform analysis of the transmission of shocks across countries; the mechanics of trade balance adjustments; the impact of frictions on trade; the role of endowments and comparative advantage; and trade policy.Full-Text Access | Supplementary Materials

Articles and Features

"Raj Chetty: 2013 Clark Medal Recipient," by Martin Feldstein

Raj Chetty is eminently deserving of being awarded the John Bates Clark Medal at the age of 33. His research has transformed the field of public economics. His work is motivated by important public policy issues in the fields of taxation, social insurance, and public spending for education. He approaches his subjects with a creative redefinition of the problems that he studies, and his empirical methods often draw on experimental evidence or unprecedentedly large sets of integrated data. While his work is founded on basic microeconomics, he modifies this framework to take into account behavioral and institutional considerations. Chetty is a prolific scholar. It is difficult to summarize all of Chetty's research or even to capture the details of his most significant papers. I have therefore chosen a selection of Chetty's important papers dealing with taxation, social insurance, and education that contributed to his selection as the winner of the John Bates Clark Medal.Full-Text Access | Supplementary Materials

"Fluctuations in Uncertainty," by Nicholas Bloom

Uncertainty is an amorphous concept. It reflects uncertainty in the minds of consumers, managers, and policymakers about possible futures. It is also a broad concept, including uncertainty over the path of macro phenomena like GDP growth, micro phenomena like the growth rate of firms, and noneconomic events like war and climate change. In this essay, I address four questions about uncertainty. First, what are some facts and patterns about economic uncertainty? Both macro and micro uncertainty appear to rise sharply in recessions and fall in booms. Uncertainty also varies heavily across countries—developing countries appear to have about one-third more macro uncertainty than developed countries. Second, why does uncertainty vary during business cycles? Third, do fluctuations in uncertainty affect behavior? Fourth, has higher uncertainty worsened the Great Rec ession and slowed the recovery? Much of this discussion is based on research on uncertainty from the last five years, reflecting the recent growth of the literature.Full-Text Access | Supplementary Materials

"The Market for Blood," by Robert Slonim, Carmen Wang and Ellen Garbarino

Donating blood, "the gift of life," is among the noblest activities and it is performed worldwide nearly 100 million times annually. The economic perspective presented here shows how the gift of life, albeit noble and often motivated by altruism, is heavily influenced by standard economic forces including supply and demand, economies of scale, and moral hazard. These forces, shaped by technological advances, have driven the evolution of blood donation markets from thin one-to-one "marriage markets" in which each recipient needed a personal blood donor, to thick, impersonalized, diffuse markets. Today, imbalances between aggregate supply and demand are a major challenge in blood markets, including excess supply after disasters and insufficient supply at other times. These imbalances are not unexpected given that the blood market operate s without market prices and with limited storage length (about six weeks) for whole blood. Yet shifting to a system of paying blood donors seems a practical impossibility given attitudes toward paying blood donors and concerns that a paid system could compromise blood safety. Nonetheless, we believe that an economic perspective offers promising directions to increase supply and improve the supply and demand balance even in the presence of volunteer supply and with the absence of market prices.Full-Text Access | Supplementary Materials

"Retrospectives: The Cyclical Behavior of Labor Productivity and the Emergence of the Labor Hoarding Concept," by Jeff E. Biddle

The concept of "labor hoarding," at least in its modern form, was first fully articulated in the early 1960s by Arthur Okun (1963). By the end of the 20th century, the concept of "labor hoarding" had become an accepted part of economists' explanations of the workings of labor markets and of the relationship between labor productivity and economic fluctuations. The emergence of this concept involved the conjunction of three key elements: the fact that measured labor productivity was found to be procyclical, rising during expansions and falling during contractions; a perceived contradiction with the theory of the neoclassical firm in a competitive economy; and a possible explanation based on optimizing behavior on the part of firms. Each of these three elements—fact, contradiction , and explanation—has a history of its own, dating back to at least the opening decades of the twentieth century. Telling the story of the emergence of the modern labor hoarding concept requires recounting these three histories, histories that involve the work of economists motivated by diverse purposes and often not mainly, if at all, concerned with the questions that the labor hoarding concept was ultimately used to address. As a final twist to the story, the long-standing positive relationship between labor productivity and output in the US economy began to disappear in the late 1980s; and during the Great Recession, labor productivity rose while the economy contracted. Full-Text Access | Supplementary Materials

Gremlins intervened in the preparation of my paper "The Economic Effects of Climate Change" published in the Spring 2009 issue of this journal. In Table 1 of that paper, titled "Estimates of the Welfare Impact of Climate Change," minus signs were dropped from the two impact estimates, one by Plambeck and Hope (1996) and one by Hope (2006). In Figure 1 of that paper, titled "Fourteen Estimates of the Global Economic Impact of Climate Change," and in the various analyses that support that figure, the minus sign was dropped from only one of the two estimates. The corresponding Table 1 and Figure 1 presented here correct these errors. Figure 2 titled,"Twenty-One Estimates of the Global Economic Impact of Climate Change" adds two overlooked estimates from before the time of the original 2009 paper and five more recent ones. Full-Text Access | Supplementary Materials